Norway’s government plans to spend 322.4 billion kroner from the Oil Fund next year

Oseberg oil field platformPhoto: Helge Hansen / NTB

The Norwegian government is cutting oil spending – it now proposes to spend NOK 84.4 billion less next year. The background is that the Norwegian economy is doing better than expected.

“The reopening of society has accelerated the Norwegian economy. The economic crisis is now largely over, and large parts of the business community expect high growth going forward,” the Ministry of Finance wrote in a press release with key figures for next year’s state budget. 

Thus, it is planned to spend less oil money next year.

“The use of oil money in 2022 is estimated at NOK 322.4 billion, measured by the structural oil-adjusted budget deficit.”

Rapid fall in unemployment

That corresponds to 2.6% of the Oil Fund at the beginning of the year, down from 3.6% this year. Thus, the use of oil money is within the so-called action rule of 3%.

“The registered unemployment rate is declining rapidly and is almost back to pre-pandemic levels. The decline is faster than we envisioned in the revised national budget in May. At the same time, there will also be some aftermath of the pandemic in 2022. The registered unemployment rate is estimated to fall from 3.2% in 2021 to 2.4% in 2022,” the press release states.

A restrictive 2022 budget

It is emphasized that even though the budget plan for 2022 in isolation seems somewhat restrictive, the very expansive budgets in 2020 and 2021 will still increase activity in the Norwegian economy in 2022.

“In addition, the phasing out of activity-limiting infection control measures in itself has a very expansive effect on the economy. Furthermore, the increased savings in households through the crisis are now reflected in high demand for goods and services.”

New estimates, based on the government’s budget, show that total value creation in mainland Norway (GDP-mainland Norway) is expected to increase by 3.8% next year, against an expected increase of 3.9% this year.

“Several industries are experiencing problems with bottlenecks, partly because it is difficult to obtain qualified labor,” the Ministry of Finance added.

In 2020, GDP-Mainland Norway had an estimated decline of 2.5%. The mainland economy describes the Norwegian economy outside the oil and gas business.

Source: © NTB Scanpix / #Norway Today / #NorwayTodayFinance

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